The Financial Services Legislation Amendment Bill has finally been introduced to Parliament. The proposed regulatory framework remains largely as it was in the Exposure Draft released for consultation in February, but there are a few twists in the detail that are going to impact on planning for the brave new world.

In brief:

The FSLA Bill confirms the course for financial advice regulation set by the February Exposure Draft:

Financial Advice Provider licensing and a new Code of Conduct remain at the heart of the new regime

Many of the more controversial points of detail previously proposed have been addressed

New regime now expected to come into full effect around May 2019.

Over the coming weeks, a special series ofFinancial Law Insightswill discuss each of the key elements of the Bill and reform proposals in turn.

In full

In our February 2017Financial Law Insightwe outlined the main reforms proposed for the regulation of financial advice as set out in an Exposure Draft of the current Bill. Under the Bill as now introduced:

the regulation of financial advice will be moved from its own standalone piece of legislation into the Financial Markets Conduct Act 2013

financial advice will only be able to be provided to retail clients by or on behalf of a licensed provider

the current designations of types of financial adviser, types of financial product that could be advised upon, and types of advice, will be abolished, and personalised robo-advice will be facilitated

the previously proposed designations of ‘Financial Adviser’, and licensed ‘Financial Advice Provider’ have been confirmed, with a new ‘Nominated Representative’ designation introduced

all financial advice will be subject to a Code of Conduct, created by a Code Working Group that will morph into a replacement Code Committee when the Bill is passed

despite all the political rhetoric, the term ‘client first’ no longer appears in the Bill

transitional licensing and competency relief mechanisms have now been spelled out.

It is a remarkable achievement for those involved to have been able to get this complex piece of regulatory reform introduced to the House before Parliament rises. There won’t be time for the Bill to be referred to a select committee, and a timetable for calling for submissions won’t be known, until after the 23 September election. However, introducing the Bill now allows the newly appointed Code Working Group to get on with its important work of devising a new code of professional conduct for financial advice services that will underpin the new regime.

Initial reaction

There’s a lot to digest in the final form of the Bill. To its credit, MBIE has produced a helpful short form summary of its responses to the main points of contention raised in its earlier consultation process. That summary can befound here.

Ditching the widely unpopular proposed terms ‘financial advice representative’ and ‘agent’ for individuals sheltering under a financial advice provider licence will be welcomed, although the neutral replacement term ‘nominated representative’ is so bland it offers no clues as to what the individual may do.

Ditching the terms ‘broker’ and ‘broking service’ was a welcome surprise, and further demonstrates the effectiveness of consultation and constructive engagement, and the willingness of MBIE to respond to concerns when warranted.

Changing terminology may seem like shuffling deck chairs, but there are many more substantive reforms contained in the Bill. The previously signalled fundamental shift in the regulatory landscape now seems set in stone.

Rather than try to traverse the full array of issues raised by the Bill and the reform process in a singleFinancial Law Insight, what we will be doing over the weeks ahead is issuing a special series ofFinancial Law Insights. Each of theseInsights will target a different aspect of the proposed reforms, so that by the end of the year you will have a comprehensive library ofInsightscovering all of the major aspects of the Bill (or at least, those aspects that we consider warrant comment and discussion!)

What next?

While the Bill can’t be progressed until well after the election, things won’t be standing still.

The MBIE team is working on regulations to support the reforms, including new and improved (here’s hoping!) disclosure regulations. We expect these to be available for consultation later in the year. The Skills Organisation is also set to review the content of the Level 5 New Zealand Certificate in Financial Services to align with the reforms.

More significantly from a regulatory framework perspective, the Code Working Group has now commenced its work on developing a new Code of Conduct. We can expect that Group to release papers for consultation in October/November. We will be monitoring its work closely over the months ahead, and will discuss its mandate in more detail in a future edition of ourFinancial Law Insightseries detailing the reforms.

If you don’t want to receive our special series ofFinancial Law Insightsdetailing the financial advice regulatory reforms, please let us know and we will remove you from the list of recipients for that. No need to worry about missing out on the other stuff - unless you tell us otherwise, we will leave you on the mainFinancial Law Insightdatabase so you can continue to receive our updates on other topical financial markets issues as they arise.